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Elevance Health, Inc. (ELV)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was mixed: operating revenue rose 6% year over year to $45.0B, but GAAP EPS fell to $1.81 and adjusted EPS to $3.84 as elevated Medicaid cost trends drove the benefit expense ratio (MLR) up to 92.4% .
  • Carelon momentum remained a bright spot: Carelon operating revenue grew 19% YoY to $14.7B; adjusted operating gain rose to $0.8B as pharmacy product revenue and risk-based services scaled .
  • 2025 outlook: adjusted EPS $34.15–$34.85; MLR 89.1% ±50 bps; adjusted OpEx ratio 10.4% ±50 bps; strong H1 weighting (>60% of adjusted EPS), plus a 5% dividend increase to $1.71 per share; share repurchases targeted at ~$2.3B, biased to H1 .
  • Key near-term stock catalysts: Medicaid rate updates in mid-year cycles (management expects H2 improvement), final MA rate notice, execution on Carelon Services’ high-growth risk offerings and Rx scaling .

What Went Well and What Went Wrong

What Went Well

  • Carelon execution and mix: Q4 Carelon operating revenue +19% YoY to $14.7B and adjusted operating gain +32% YoY to $0.8B, driven by higher pharmacy product revenue and risk-based services growth .
  • Expense discipline: adjusted operating expense ratio improved to 9.9% in Q4 and 10.6% for FY24, down 170 bps and 70 bps YoY respectively, reflecting cost management and efficiency gains .
  • Capital return and confidence: Q4 buybacks of $1.8B (4.5M shares), FY24 repurchases of $2.9B, and a 5% quarterly dividend hike to $1.71; adjusted EPS guide for 2025 indicates confidence in returning to ≥12% long-term EPS CAGR over time (management commentary) .

What Went Wrong

  • Medicaid trend pressure: Q4 benefit expense ratio rose 320 bps YoY to 92.4% on elevated Medicaid trends; Health Benefits Q4 operating margin compressed to 0.6% (from 2.1% LY) .
  • Margin compression vs sequential: Adjusted operating margin in Q4 (2.3%) trailed Q3 (5.3%); adjusted EPS fell to $3.84 from $8.37 in Q3 as utilization and mix weighed on Health Benefits .
  • Outlook embeds higher MLR: 2025 MLR guided to ~89.1% (±50 bps), ~60 bps above 2024 midpoint, reflecting persistent Medicaid elevation, acquisitions, and Part D redesign impacts (prudence on cost trend) .

Financial Results

Consolidated results vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Total Operating Revenue ($B)$42.454 $44.719 $44.989
Total Revenues ($B)$42.647 $45.106 $45.442
GAAP Diluted EPS$3.63 $4.36 $1.81
Adjusted Diluted EPS$5.62 $8.37 $3.84
Operating Margin (%)3.0% 3.1% 1.5%
Adjusted Operating Margin (%)3.2% 5.3% 2.3%
Benefit Expense Ratio (%)89.2% 89.5% 92.4%
Adjusted Operating Expense Ratio (%)11.6% 9.6% 9.9%

Notes: Q4 operating revenue +6% YoY; GAAP EPS down on elevated Medicaid trend; sequential margins and adjusted EPS declined from Q3’s stronger performance .

Segment breakdown (Q4)

SegmentQ4 2023 Operating Revenue ($B)Q4 2024 Operating Revenue ($B)Q4 2023 Operating Gain ($M)Q4 2024 Operating Gain ($M)Q4 2023 Op Margin (%)Q4 2024 Op Margin (%)
Health Benefits$36.547 $37.580 $767 $207 2.1% 0.6%
CarelonRx$8.827 $9.977 $490 $533 5.6% 5.3%
Carelon Services$3.574 $4.769 $102 $35 2.9% 0.7%
Corporate & Other$0.181 ($0.014) ($75) ($102) NM NM
Eliminations($6.675) ($7.323) ————
Total$42.454 $44.989 $1,284 $673 3.0% 1.5%

Carelon segment details (Q4): Carelon operating revenue $14.7B (+19% YoY); adjusted operating gain $0.8B (+32% YoY) .

KPIs and other metrics

KPIQ4 2023Q3 2024Q4 2024
Total Medical Membership (000s)46,829 45,760 45,734
Medicaid Membership (000s)10,503 8,926 8,917
Medicare Advantage (000s)2,047 2,047 2,066
CarelonRx Adjusted Scripts (MM)78.0 80.2 82.9
Days in Claims Payable (days)47.3 (calc from text trend) — see note42.8 42.9
Q4 Share Repurchases—$60MM (0.1MM shs) $1.8B (4.5MM shs)
FY Operating Cash Flow ($B)——$5.8B

Note: Q4 DCP cited at 42.9 days; Q3 at 42.8; press commentary states -4.4 YoY vs Dec-23, consistent with higher average benefit expense/day .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP Diluted EPSFY 2025n/a (first issuance)$30.40–$31.10 First issuance
Adjusted Diluted EPSFY 2025n/a$34.15–$34.85 First issuance
Total Operating Revenue GrowthFY 2025n/aHigh single to low double digit growth First issuance
Benefit Expense Ratio (MLR)FY 2025n/a89.1% ±50 bps First issuance
Adjusted Operating Expense RatioFY 2025n/a10.4% ±50 bps First issuance
Adjusted Operating GainFY 2025n/a$9.55–$9.85B First issuance
Net Investment IncomeFY 2025n/a$1,875MM First issuance
Interest ExpenseFY 2025n/a($1,475)MM First issuance
Adjusted Effective Tax RateFY 2025n/a22.0%–24.0% First issuance
Diluted SharesFY 2025n/a225–226MM First issuance
Operating Cash FlowFY 2025n/a~ $8.0B First issuance
Health Benefits Op Rev GrowthFY 2025n/aHigh single digit growth First issuance
CarelonRx Op Rev GrowthFY 2025n/aMid-teens growth First issuance
Carelon Services Op Rev GrowthFY 2025n/a>50% growth First issuance
GAAP Operating Margin vs 2024: Health BenefitsFY 2025n/a(50)–(25) bps vs 2024 First issuance
GAAP Operating Margin vs 2024: CarelonRxFY 2025n/a0–20 bps vs 2024 First issuance
GAAP Operating Margin vs 2024: Carelon ServicesFY 2025n/a(100)–(50) bps vs 2024 First issuance
Quarterly DividendFirst quarter 2025$1.63 prior $1.71 (+5%) Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Medicaid cost trend and ratesElevated acuity from redeterminations; constructive state rate dialogs; expect upper-half MLR guidance range; DCP elevated; normalization over time MLR 89.5% (+270 bps YoY); DCP 42.8 days; rates catching up; 2024 guide reset (EPS ~33) Trends remained elevated/stable; H1’25 persistence, H2 improvement as rates catch up; “tale of two halves” Stabilizing, gradual improvement expected H2’25
Medicare Advantage growth/marginsDisciplined bids; margins to improve vs 2023 but below LT targets; focus on D-SNP and local density AEP set-up prudent; 2024 Medicare actions support 2025 profitable growth Guiding 7–9% MA growth, mostly retention; minimal growth post-AEP; margin stability targeted for 2025 Balanced growth, margin stabilization focus
Carelon Services and Rx scalingExternal wins; risk-based services expansion; specialty (BioPlus, Paragon, Kroger) build-out Carelon revenue +15% YoY; one-time Rx favorable true-up; continued scaling CareBridge acquisition; Services >50% growth in 2025; Rx mid-teens growth; strong Blues penetration Accelerating scale and external traction
Commercial pricing/marginsMargin recovery underway; hardened/rational market; retention strong Disciplined pricing; record national account retention; sequential persistence improvement Above-average trend priced in; margins remain robust Sustained discipline, stable to improving
Part D redesign (2025)Headwind acknowledged; strategy balanced with value —Contributes to higher 2025 MLR; prudent stance Headwind incorporated
Cash flow and seasonalityFY24 CFFO ~>$7B (updated in Q2); DCP to mid/upper 40s; H1/H2 seasonality Q3 CFFO +$2.7B; leap year impacts Q3 MLR higher; Q4 offset 2025 adjusted EPS >60% in H1; buybacks front-loaded H1-weighted 2025 earnings/capital return

Management Commentary

  • “Fourth quarter GAAP diluted earnings per share of $1.81 and adjusted diluted earnings per share of $3.84, consistent with the expectations we shared back in October.” – Gail Boudreaux, CEO .
  • “We are providing guidance for adjusted diluted earnings per share to be in the range of $34.15 to $34.85… The actions we are taking now will enhance the long-term earnings power… and underscore our confidence in returning to at least 12% adjusted EPS growth annually on average over time.” – Gail Boudreaux .
  • “We expect our consolidated medical loss ratio to be around 89.1%, plus or minus 50 basis points… driven by strategic growth mix in Medicare (including Part D), recent acquisitions, and prudent view of cost trends.” – Mark Kaye, CFO .
  • “We anticipate operating revenue to grow in the high single to low double-digit percent range… we plan ~$2.3B in share repurchases with a bias toward the first half of the year.” – Mark Kaye .
  • “Carelon Services experienced impressive internal and external growth in 2024, and we are positioned for revenue growth above our long-term target range for this segment in the year ahead.” – Gail Boudreaux .

Q&A Highlights

  • Medicare Advantage: 7–9% MA growth reflects strong retention; minimal incremental growth post-AEP; margin stability targeted for 2025 amid disciplined cost management .
  • Medicaid: Elevated behavioral and inpatient trends remained stable into Q4; margins expected to improve in H2’25 as rates catch up; “tale of two halves” embedded in guide .
  • Part D redesign + MLR: 2025 MLR midpoint ~89.1% (+~60 bps YoY) from Medicare mix/Part D redesign, acquisitions, and prudent trend assumptions .
  • Carelon growth: Services >50% growth in 2025 (including CareBridge), organic services growth >20% excluding acquisitions; Rx mid-teens growth with high-touch service wins and Blues penetration .
  • Seasonality and capital return: >60% of 2025 adjusted EPS expected in H1; repurchases front-loaded; dividend raised to $1.71 (14th consecutive increase) .

Estimates Context

  • Wall Street consensus (S&P Global) for the latest quarter was unavailable at time of request due to data retrieval limits. As a result, we cannot quantify beats/misses versus consensus for Q4 2024. Values would have been retrieved from S&P Global if available.

Key Takeaways for Investors

  • 2025 is front-loaded: management expects slightly over 60% of adjusted EPS in H1; repurchases biased to H1—timing matters for trading setups .
  • Medicaid remains the swing factor: trends are elevated but stable; rate alignment expected to drive H2 improvement—watch July rate cycles and state updates .
  • Carelon is the growth engine: Services >50% growth in 2025 and Rx mid-teens growth underpin topline/earnings diversification; continued Blues/client wins are key proof points .
  • Margin prudence in guide: 2025 MLR at ~89.1% ±50 bps embeds Medicaid/Part D headwinds and acquisitions; beat potential requires faster rate catch-up or trend moderation .
  • Capital returns intact: dividend up 5% to $1.71 and ~$2.3B buybacks planned support TSR while investing for growth .
  • Commercial strength offsets government pressures: hardened pricing, strong retention, and stable margins provide ballast amid Medicaid/Part D variability .
  • Watch regulatory catalysts: final MA rate notice and evolving Part D implementation could alter 2025 mix/MLR dynamics; management signaling constructive stance with policymakers .

Appendix: Additional Details

  • Consolidated highlights (Q4/FY): Operating revenue $45.0B/$175.2B; operating margin 1.5%/4.5%; adjusted operating margin 2.3%/5.3%; FY operating cash flow $5.8B (~1.0x GAAP NI) .
  • Segment context: Health Benefits Q4 operating margin 0.6% (Medicaid trends); CarelonRx Q4 margin 5.3%; Carelon Services Q4 margin 0.7% with adjusted gain uplift from business mix and risk scaling .
  • Membership: Total medical 45.734MM; Medicaid 8.917MM; MA 2.066MM; fee-based commercial 27.199MM .
  • Balance sheet: YE cash and cash equivalents $8.288B; long-term debt $29.218B; total shareholders’ equity $41.315B .